3 Key Signs You’re Keeping Too Much Money in Your Checking Account
Written by
Cindy Lamothe
Edited by
Jenna Klaverweiden
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If your checking account is looking a little too healthy, it might not be the flex you think it is. Sure, it feels good to see a big number sitting there, but if most of your money is just hanging out instead of working for you, you could be missing out on easy growth (and better financial security).
“Your checking account should be a pit stop, not a parking lot for your money,” said Harold G. Wenger Jr., partner and wealth manager at Kingsview Partners.
Here are some key signs you might be keeping too much cash in your checking account — and what to do instead.
You’re Consistently Holding More Than 1 to 2 Months’ Worth of Expenses
A big red flag, according to Wenger, is a checking account that rarely sees a dip because you are keeping a cushion far beyond what is needed to cover bills and emergencies.
“It’s good to have a safety net, but hoarding too much cash means you are losing its value to inflation and earning little to no interest,” he said.
He recommended capping checking reserves at about one to two months’ worth of essential expenses. Anything more should be working for you, not sitting in an account collecting dust.
Too Much of Your Money Isn’t Compounding
“Money in a checking account does not grow,” Wenger emphasized. And if you have plans to retire, travel or leave a legacy, that money needs to be invested. Even transferring that to a high-yield savings account or a low-risk investment portfolio can be a good move to protect your purchasing power.
Over time, the difference between leaving your money idle and letting it compound can be huge. Every dollar you invest has the potential to earn returns, and those returns can earn returns of their own. Meanwhile, the cash sitting in your checking account quietly loses value as inflation rises.
The bottom line: Your checking account is meant for spending and short-term needs — not long-term growth. Once you’ve covered your bills and built a small buffer for unexpected expenses, consider moving the rest somewhere it can actually work for you.
You Feel ‘Comfortable’ but Aren’t Making Financial Progress
Wenger said many people confuse a hefty balance with great financial health. “But it is not at all the same as a healthy plan,” he said.
He noted that if you are not contributing to a retirement account, a brokerage account or even a 529 plan for your grandkids, that comfort may be masking a lack of momentum.
Taking some of that extra money and putting it toward a tax-advantaged account can create a lasting impact.
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